Significance of Opportunity Costs. Economics Assignment Help

There are competing demands (depending upon the marginal utility of the consumers) for the same resources. Since the resources are scarce, certain demands are satisfied only at the sacrifice of other demands. The resources . tend to move from those use in which their demand price (marginal utility to the consumers in the aggregate) is lower to those in which it is higher until they tend to be distributed in various uses (for the production of various commodities and services) in such a way as to equalize their marginal utilities in the various uses. It is thus the demand price or marginal utility which determines how much of a particular factor of production will be utilized for the production of a particular commodity. The supply of a commodity, therefore, ultimately depends upon the attraction offered by the demand price (or marginal utility) to the relevant factors of production. If this demand price is 1i0 High enough, these factors will be used for the production of commodities the demand price for which is high enough to attract them. Thus, the cost of production of a commodity is fundamentally the sum-t nal of retention prices that have to be paid to the productive services for retaining them in a particular industry, and this must at least be equal to what they can command elsewhere.